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A guide to LGBTQ+ personal finance

Navigating personal finances, tax, estate planning and pensions can be more complicated if you are a member of the LGBTQ+ community. Here are some handy tips to make the journey easier.

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Mature same sex female couple at Home in kitchen with digital tablet

According the ONS statistics from 2019, an estimated 1.4 million people aged 16 and over in the UK identified as lesbian, gay or bisexual (LGB) in 2019, making 2.7% of the UK population aged 16 and over.

In the personal finance space, although LGBT+ people have made a lot of progress towards achieving equality in recent years thanks to the Equality Act of 2010, which makes it illegal to discriminate against people on the basis of sex or sexual orientation.

But in some cases non-heterosexual individuals and couples can still have a harder time navigating state benefits, financial products and consumer issues.

Here are some tips to help you navigate complex issues like benefit entitlements, pensions and estate planning.

State benefits

Same-sex couples who live together are now treated as a couple when claiming for means-tested benefits, whether you are living together, married or in a civil partnership. 

This means that your financial resources and requirements are jointly assessed when applying for certain benefits, including:

  • Universal Credit

  • Income Support

  • Income-related Employment and Support Allowance

  • Income-based Jobseeker’s Allowance

  • Working Tax Credit

In practice, this may mean that you’ll receive less from the benefit schemes listed above, as your partner’s financial situation is taken into account in the same way as a heterosexual couple’s finances would be examined.

However, your eligibility and the amount you may receive in payments when applying for non-means tested benefits will not be affected by your relationship status. 

These benefits include:

  • State pension 

  • Attendance Allowance

  • Personal Independence Payment 

These benefits are all calculated on the basis of your individual circumstances.

If you are in a civil partnership, you may be able to claim a bereavement support payment if your partner dies. 

You may also be eligible for a state pension based on a partner’s national insurance contributions.

If you have children, you may also be able to claim Child Benefit. Citizens Advice has a handy guide to help you work out if you’re eligible.

If your relationship ends, you and your partner have a legal responsibility to support one another financially at the end of a marriage or civil partnership and to make provision for dependent children.

If you’re thinking of creating a civil partnership as opposed to getting married, in some circumstances it can be beneficial to draw up a document known as a pre-registration agreement.

This is similar to a prenuptial agreement that some couples draw up before getting married. 

A pre-registration agreement can set out your rights and obligations towards one another if the relationship ends. The agreement can cover what should happen to personal possessions, assets, pensions and arrangements for any children.

Citizens Advice has full details on how a pre-registration agreement works.

Tax and personal allowances

Although you may be living with a partner, each partner is taxed separately.

Each tax year you have a personal allowance which, for the 2021/2022 tax year, is £12,570. This is the amount of income that you do not have to pay tax on.

You may also be eligible for the Marriage Allowance. This enables a couple to transfer £1,260 of their personal allowance between them. However, to benefit from this you have to be married or in a civil partnership. In addition, one of you needs to be a non-taxpayer while the other is a basic rate taxpayer.

Elsewhere, your Capital Gains Tax allowance, which is worth £12,300 for an individual and £24,600 for a couple in 2021/22, is the amount of profit you can make from an asset in a tax year before you begin to pay tax on those profits. 

Married couples and civil partners can transfer assets between one another without incurring Capital Gains Tax. Other allowances, such as your personal savings allowance and ISA allowance, remain the same and cannot be transferred between partners.

 Compare ISA savings and investment accounts.

Pensions and retirement

Until recently there were still some key differences in the way that occupational and privately held pensions were treated for same-sex couples. 

According to the charity Age UK you can be entitled to a survivor’s pension from your spouse or civil partner’s occupational pension scheme if they die before you.

Before 2017, these pension schemes were only required to offer survivor’s benefits to same-sex couples based on the deceased pension saver’s contributions (or ‘service’) from 2005 onwards.

This changed four years ago when the UK Supreme Court made landmark ruling that any discrimination based on sexual orientation in the provision of pensions was illegal. 

The LGBT+ advocacy group and charity Stonewall has full details on how being in a civil partnership or same-sex marriage can impact on payments to pension savers’ surviving partners.

Thankfully, provision for LGBTQ+ retirees is steadily improving, and not just in financial products. One example of this is the launch of a retirement community catering specifically to LGBTQ+ pensioners in central London, set to open this summer.

Compare private pension providers, to help your money go further when you retire

You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.

Insurance

Back in 2017, 37% of LGBT+ people had no insurance compared with 25 per cent of the general population. For example, there was a time when same sex couples found it difficult to get life insurance.

But insurers have made huge gains in looking after the LGBT community, ending discriminatory practices such as HIV testing on insurance contracts and rejecting applications from same sex couples.

Although you don't need to get specific LGBT home or travel insurance policy anymore, there are providers that offer useful add-ons that cater to the needs to the community.

Emerald Life’s home insurance policy, for example, provides legal expenses cover for service provider discrimination based on a customer’s sexuality. Its travel insurance policy covers foster, adopted and surrogate children, and Emerald’s wedding insurance covers legal expenses in cases of discriminatory treatment by service providers.

Compare life insurance quotes.

Estate planning and inheritance

If you get married or enter into a civil partnership, it's important to rewrite your will to make sure your partner is protected if you die.

If you don't have a will, and are living with a partner in an informal arrangement rather than being married or in a civil partnership, when you die, your surviving partner will not entitled to to anything as you'll be considered intestate i.e. a person who dies without leaving a will.

An independent financial adviser (IFA) is a qualified and regulated professional able to give you advice on the right financial products to help you meet your financial goals. In addition to investment advice, this could also include guidance on the suitable insurance or financial protection products.

While there are few advisers who focus uniquely on offering financial advice specifically tailored to the LGBTQ+ community, some are able to provide insights that will be particularly useful, particularly with regards to life insurance.

For same-sex couples looking to start a family, reviewing your financial protection with a professional can be great way to help you ensure your loved ones can be financially secure, whatever the future holds.